Wednesday, October 28, 2015

The Morning Call--Today is all about the Fed

The Morning Call


The Market

The indices (DJIA 17623, S&P 2071) slipped for a second day, but little changed technically.  The Dow ended [a] above its 100 moving average, now support, [b] right on its 200 day moving averages, which now represents resistance but is the midst of a challenge; how the Dow closes today will determine whether or not it is successful, [c] in a short term downtrend {17036-17751}, [d] in an intermediate term trading range {15842-18295} and [e] in a long term uptrend {5369-19241}.

The S&P finished [a] above its 100 moving average, now support, [b] above its 200 day moving average for the third day, which now represents resistance; if it remains there through the close on today, it will revert to support, [c] in a short term trading range {2016-2104}, [d] in an intermediate term uptrend {1943-2735} [e] a long term uptrend {797-2161}, [e] above its September highs, now representing support.

November Market performance in pre-election years (short):

Volume was flat; breadth was down.  The VIX (15.4) was up slightly,  finishing [a] below its 100 day moving average, now resistance, [b] within a short term downtrend and [c] in intermediate term and long term trading ranges.  Below 13, it will again represent good portfolio insurance.
The long Treasury was up fractionally, ending above its 100 day moving average, still support, within very short term, short term and intermediate term trading ranges and continues to develop a pennant formation. 

GLD was up slightly, closing [a] above its 100 day moving average, now support [b] in a short term uptrend [c] in intermediate and long term downtrends.  In my opinion, it needs to successfully challenge the upper boundary of its intermediate term downtrend to conclusively establish that a bottom has been made.

Oil fell 1.5%, ending below its 100 day moving average but still within very short term and short term trading ranges.  The dollar was up, finishing above its 100 day moving average for the third, reverting it from resistance to support.  However, it remains within a very short term downtrend and short and intermediate term trading ranges.

Bottom line: the Averages spent another day consolidating.  While down, they remained within a fairly tight price range.  In addition, they held recently reset multiple resistance levels.  The one bit of cognitive dissonance is the performance of the small caps and the transportation average which are getting whacked.  Nonetheless, this pin action continues to suggest to me that there is more upside, likely challenging their all-time highs and upper boundaries of their long term uptrends.  Although I continue to believe those challenges will be unsuccessful.


            The economic stats continued to roll over yesterday: September durable goods were bad, so was October consumer confidence and the October Markit flash services PMI was below expectations.  On a more positive note, month to date retail chain store rose modestly versus the prior week and the October Richmond Fed manufacturing index better than anticipated.  The big number was the durable goods report which is a primary indicator.

            There was also an announcement that a budget/debt ceiling deal had been tentatively consummated.  I had noted previously that I thought that this was the high probability outcome.  Nevertheless, it does remove a potential headache for investors.

The Club for Growth on the budget/debt ceiling deal (short):

                Overseas, the dataflow remained slow; the only stat was third quarter UK GDP growth which slowed from its second quarter rate.

                ***overnight, Swedish central bank quadrupled down on QE.

Bottom line: another day’s data and the more it looks like last week’s upbeat stats were an outlier.  Of course, this is a busy week, so that could change; but we now have half of all the datapoints that will released---and the trend is not good.  On the other hand, we should expect another dose of Fed pabulum today and that will likely inspire another investor walk through the tulips. 

I would not chase stock prices at these levels.  Indeed, I would use the strength to take some profits in winners and/or eliminating investments that have been a disappointment.
            The problem with eternal bullishness (medium):

            Have emerging markets bottomed? (short):


   This Week’s Data

            Month to date retail chain store sales were up versus the prior week.

            The August Case Shiller home price index was in line.

            The October Markit flash services PMI came in at 54.4 versus expectations of 55.3.
            October consumer confidence was reported at 97.6 versus estimates of 102.5

            The October Richmond Fed manufacturing index came in at -1 versus projections of -2.

                Weekly mortgage applications fell 3.5% while purchase applications were down 3.0%.

                The September US trade deficit was $58.2 billion versus forecasts of $67.2 billion.


            The tale of two economies: what the models say and what the data say (medium and a must read):
            The pickle in which the global financial system finds itself (medium):



Summers and Mankiw on the Cadillac tax (medium):


            China’s reaction to US ships navigating inside the 12 mile limit (medium):

            US policy in Syria---who’s on first? (medium):

No comments:

Post a Comment